4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
CCI: 183.1079
The EUR/USD currency pair was trading on Wednesday and Thursday as it should be trading at present. In principle, even before the beginning of these days, it was possible to predict with a 90% probability exactly how the pair would move. Of course, there are sometimes situations when traders begin to work out the meeting results that have not yet been announced. However, this was not the case on Wednesday and Thursday. On Wednesday, the pair traded all day with minimal volatility and without a clear direction of movement. The way it has been moving in the last few weeks. When the results of the Fed meeting became known, and Jerome Powell made a speech, the US dollar began to fall in price and continued to do so all Thursday, as European markets also needed to work out all the information received. Thus, the euro/dollar pair showed a trend movement for the first time in several weeks, and it was finally based on macroeconomic statistics and a fundamental background. We said earlier that only very strong data from the Fed could further strengthen the US dollar. If the US regulator had called the exact date of the curtailment of the quantitative stimulus program or said that it would seriously consider this issue in the coming months, then the US currency could have received market support. In almost all other cases, the US currency was expected to fall.
We also said that the downward movement has almost stalled in recent weeks. Formally, the downward trend continued, but there was no downward movement. It indicated that the bears had exhausted their potential. Consequently, everything was going to the fact that a new upward trend would begin. And we have also repeatedly written about this. From the point of view of global "technology," in the last few months, the pair has formed the second round of corrective movement against the upward trend, which has lasted for more than a year and a half. Since all global factors remain on the side of the European currency, we have long expected that the upward trend will resume. We even indicated the level of 1.1700, near which the current downward movement may end. The price, however, did not eventually reach this level. However, it eventually turned around very close to it. Thus, from our point of view, a new upward trend has already begun on the 4-hour timeframe, and the global upward trend has resumed on the 24-hour timeframe. If so, then in the coming months, we expect the pair's quotes to return to the level of 1.2260 and exceed it. We are also waiting for an update of the three-year highs, which are located 100 points higher.
In this article, I would also like to consider what can prevent the execution of this scenario. By and large, if the upward movement continues, it will mean that the US dollar is getting cheaper again because of the Fed. First, the Fed has not given any signals about a possible curtailment of the QE program. Second, the Fed continues to pour hundreds of billions of dollars into the American economy, continuing to provoke an increase in inflation. Third, the Fed does not need an expensive dollar, which will make it very difficult to service the current government debt. There are also several indirect reasons why the Federal Reserve will continue to adhere to the most lenient monetary policy. First, Jerome Powell cannot fail to understand that the entire current growth of the American economy is artificial.
We have already said that any country in the world can achieve the same growth if it pours trillions of freshly printed money into its economy. Roughly speaking, this growth does not mean real economic growth. We all see that stock indices grew during the crisis, which means that the inflow of investments did not stop all the time of the pandemic. Where does the money come from? Money from the Fed. The increase in the money supply in the US has led to an increase in inflation, which the Fed is not even going to slow down somehow. Again, because such inflation was expected at the Fed, so it does not frighten anyone. When you pour more than $ 10 trillion into the economy in a year and a half, what else can you expect from inflation? In addition, given the state of the labor market in the United States, when about 7 million more Americans did not find a job compared to the figures before the crisis, it is impossible to say that the economy has recovered. It recovered after the crisis exclusively on paper, where everything is measured in dollars. Therefore, the stimulus will continue, and therefore the money supply will continue to grow. It is called "chasing China," which survived the pandemic quite easily and lost almost nothing in economic terms. The United States needs to restore its economy completely as soon as possible and achieve full employment, not to let China get close to it. And to achieve this goal, we will close our eyes to GDP, which is growing by almost double digits, and to inflation, which may break a 25-year record in the near future. It doesn't matter. The main thing is not to let China get close to you.
Therefore, the trade war will be resumed in the near future, and the Joe Biden administration will not try to smooth relations with China because this is the party's general policy, or rather the White House. World domination should still belong to the States. Second, Jerome Powell is likely to leave his post in January 2022. There are already rumors that his place will be taken by the most "dovish" member of the current composition of the monetary committee. It means that monetary policy can continue to remain ultra-soft. In addition, we have already said several times that the global "dollar trend" ended around 2017. Global trends usually change every 8-12 years. Therefore, the dollar may become cheaper for another five years, especially if this is facilitated by the Fed, which prints money in trillions.
The volatility of the euro/dollar currency pair as of July 30 is 57 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1833 and 1.1947. The reversal of the Heiken Ashi indicator downwards signals a round of corrective movement.
Nearest support levels:
S1 – 1.1841
S2 – 1.1780
S3 – 1.1719
Nearest resistance levels:
R1 – 1.1902
R2 – 1.1963
R3 – 1.2024
Trading recommendations:
The EUR/USD pair continues its recoilless upward movement. Thus, today you should stay in long positions with the targets of 1.1902 and 1.1947 until the Heiken Ashi indicator turns down. Sales of the pair will be possible not before the price is fixed back below the moving average line with a target of 1.1780.
